One of the most critical factors to consider when selling your house is ensuring that you have priced it correctly and have set the right asking price.
Pricing is all about supply and demand. Demand can wane after your home is on the market for over 21 days. Of course, there’s nothing stopping you from dropping your price later, but this may require a larger discount if demand continues to wane.
These are the basic components of the process
Factors to consider
A starting point is to work out the value of the land component of your property. Land value is affected by many factors including position, shape, size, slope, topography and so on.
Next, consider what you think the structures on your property might be worth (e.g. house, unit, pool, garden, garages etc.).
Get a property eveluation and price estimate
Now it’s time to be a little more commercial and scientific. There are websites that can provide you with a free valuation for your property. This will provide you with a calculated estimate on what your property could be worth, along with available property history and comparable properties in the area.
This can be a great way to help test and refine your price expectations, however don’t forget that this valuation may not take into account any improvements you’ve made – so use this as a guide only.
You should also arrange for two or three local selling agents to provide a free property appraisal. Not only will they be able to give you some guidance on price setting, but you can also use the occasion as an opportunity to assess their commission costs, selling strategies and engagement skills – which may help you choose the agent you want to work with.
Pull comparable listings and sales
Look at similar homes that have been listed in the same neighborhood as your property over the last three months. Pay attention to neighborhood dividing lines and physical barriers such as major streets, freeways, or railroads. Identical homes directly across the street from each other can vary by as much as $100,000 in some neighborhoods. Perceptions and desirability have value. Compare similar square footage within a 10 per cent variance up or down if possible.
Compare similar ages. One neighborhood might consist of homes built in the 1950s right next to another ring of construction from the 1980s. Values between the two will differ. Make sure you’re comparing apples to apples.
Look at the sold comps
Now compare original list prices to final sale prices to determine price reductions. Compare the final list prices to actual sold prices to determine ratios. It’s common for homes to sell for more than 100 per cent of list price in a seller’s market. Homes generally sell for list price or less in a buyer’s market.
Adjust pricing for lot size variances, configuration, and amenities or upgrades.
While you’re talking with selling agents, get them to provide you with a list of comparable sold properties going back over the past six months or so. Comparable means they are of a similar size, location and type. You want these comparisons to be reasonably current, so they better reflect what’s happening in the market today.
You can use these lists to test things like land value, market demand and of course prices achieved. They should also be compared and contrasted with your property to help assess whether you may need to make any price adjustments.
Withdrawn and expired listings
Pull the history for any expired and withdrawn listings to determine whether any of them were taken off the market and relisted. If so, add those days on market back to these listing time periods to arrive at an actual number of days on market. Look for patterns as to why these homes didn’t sell and note any common factors they might share. Think about the steps you can take to prevent your home from becoming an expired listing based on this information.
The ultimate sales prices of these homes are unknown until the transactions close, but that doesn’t stop you from calling the listing agents and asking them to tell you how much the property is selling for. Again, make a note of the days on the market. This can have a direct bearing on how long it will take before you see an offer. Examine the history of these listings to determine price reductions.
Visit these homes so you can see what buyers will see when they visit. Make note of what you like and dislike and the general feeling you got upon entering the homes. Recreate the positive feelings of reception in your own home if possible.
Looking at comparable properties that are currently listed for sale allows you to take into account what’s likely to happen as far as future sales are concerned. Not only will it give you a sense of vendor expectations, but it will also give you some insights into the pricing and sales strategies of your competition.
Square foot cost comparisons
The buyer’s lender will order an appraisal after you receive an offer, so you’ll want to compare homes with similar square footage to come as close to the eventual appraised value as possible.
Market dependent pricing
After you’ve collected all your data, the next step is to analyze that data based on market conditions.
Your sales price might allow some wiggle room for negotiation in a buyer’s market, but you’ll want to be strong enough and close enough to the last comparable sale to entice a buyer to tour your home.
You might want to add 10 per cent more to the last comparable sale in a seller’s market. You can ask more than the last comparable sale, and you’ll likely get it if there is little inventory and many buyers.
In a balanced or neutral market, you might want to initially set your price at the last comparable sale then adjust it for the market trend.
To get a handle on where the market is sitting, read the latest finance and property articles, and talk to local selling agents. This will provide you with useful guidance and insights.
As a final thought, remember that at the end of the day, the market will determine what your property is worth. If you want a successful sale, it is important that you and the market are on the same page. Familiarise yourself with what’s happening in the market!
Contact us on 03 5201 7969 to find out whether you are able to sell to upgrade your home.
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